Reuters reported that a new factory that will build high-efficiency transmissions for petrol-powered cars was unveiled by German automaker Audi in Tianjin last week. The company aims to use petrol engines that are more fuel-efficient and cleaner, along with hybrid technology.

Some industry officials however, cautioned Chinese firms that their goals are too costly and different from what consumers actually want. Despite that, the government has already released $4.5 billion in green car subsidies last year.

"In 2020, most cars we will sell will be combustion engines, so to fulfill (fuel consumption targets) you have to improve the consumption of each and every car of the Audi model range," Audi China chief Joachim Wedler said during the opening of the new plant.

Global automakers are still undecided on the future of the industry's green initiatives. In China, both the government and state automakers support electric vehicles although the electricity that they need may come from burning coal, the report said.

Based on the government's 2020 requirements, average cars must consume less than 5 liters of petrol per 100 kilometers, which is 30 percent lower than the present standard levels.

In 2015, as the government rolled out its incentives, domestic automakers that want to build electric and hybrid vehicles increased, which pushed the sales of "new energy vehicles" (NEVs) in 2015. But despite the surge, only 1.4 percent of cars sold in the first seven months of 2016 were NEVs.

Domestic companies also operate on small scale and many of them, which are state-linked, are bound to support government policy, according to a manager at a major foreign automaker's China joint venture.

The manager added that foreign automakers that form joint ventures in China also have to contend with Chinese manufacturing strategies to enable them to adapt to their traditional businesses.

He added that his company, like Audi, will try a gradual strategy, developing more efficient engines as well as plug-in petrol-electric hybrids to suit the government goal on cutting harmful emissions.

In Tianjin, Audi China chief Wedler said that its company and partner China FAW Group will launch their first locally-produced plug-in hybrid vehicle this year.